Aspen Dispatch: As Advertised?

ASPEN, COLORADO, August 18 – At the 2008 Aspen Summit of the Progress and Freedom Foundation, day one’s afternoon panel discussed the privacy and competition concerns that are developing as the online advertising market expands and evolves.

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ASPEN, COLORADO, August 18 – Discussants at the 2008 Aspen Summit continue to look out from the cutting edge to the market and policy landscape for emergent online revenue streams. Day one’s afternoon panel discussed the privacy and competition concerns that are developing as the online advertising market expands and evolves.

  • Berin Szoka, Visiting Fellow, The Progress & Freedom Foundation (moderator)
  • William Blumenthal, General Counsel, Federal Trade Commission
  • Dan Jaffe, Executive Vice President, Government Relations, Association of National Advertisers
  • Alan Raul, Partner, Sidley Austin
  • Greg Sivinski, Senior Attorney, Antitrust, Microsoft
  • Hal Varian, Chief Economist, Google Inc.
  • Mike Zaneis, Vice President, Public Policy, Interactive Advertising Bureau

The panelists addressed a number of conflicts and concerns that are arising in the online advertising industry, an industry that now accounts for $21 billion in revenue according to Mike Zaneis. As more users go online and, more importantly, shop and consume media online, the Internet ad space becomes more valuable and efforts to reach users in this ad space become more targeted and, perhaps, invasive.

In addition to privacy concerns, there is the issue of competition in the online advertising market, which, much like the ISP industry in the lat 90s, is experiencing a great deal of consolidation, typified by the recent Google-Doubleclick merger.

Concerns over privacy and a de facto compromise on the competition issue are what led the Federal Trade Commission to propose online behavioral advertising principles in December 2007. The FTC’s William Blumenthal was on-hand to present an overview of these principles and herald cooperation from the online advertising industry as being integral to a market based solution. “Search sites are finally competing on the basis of who can offer the most privacy,” Mr. Blumenthal noted.

Microsoft’s Greg Sivinski expressed his concern that the recent deal to share advertising between Google and Yahoo will not improve the type of competition the FTC is concerned about. The rhetoric between Microsoft and Google over the potential impact of this deal is clearly not on good terms. Google’s Hal Varian responded vehemently that “search engines aren’t competing for advertisers, they’re competing for users…the competition for users is immense.”

Google would like to allay fears that the deal with Yahoo will lead to anti-competitive behavior that favors Google’s search engine by pointing to the fact that Google continue to deliver quality, affordable advertising to Yahoo’s search site because the business model for online advertising will always follow the users.

The panelists also briefly considered another extreme of “following the users”: 4th party advertising. This is targeted online advertising undertaken by Internet Service Providers and all of the unique tools for identifying and tracking user behavior that would be at the disposal of these 4th parties. Targeted advertising by ISPs would likely involve packet inspection of user data (including search queries) sent through the ISPs pipes.

4th party advertising is clearly an emergent phenomenon and many of the panelists recommended a wait-and-see approach, but Hal Varian posited that there might be “a free rider problem when an ISP inspects a packet intended for a search engine.”

Nevertheless, the online advertising industry remains relatively unregulated, though increasingly under inspection. Industry representatives on the panel seemed to appreciate the “guidance” thus far offered by entities like the FTC in the online advertising frontier but also expressed concern for over-regulation. The hope is that advertisers will have the regulatory freedom to pursue advanced tracking and targeting of users in order to improve the online experience and develop an efficient and profitable market for online advertising and the content it will support. “What’s spam?” Dan Jaffe asked, “spam is non-targeted advertising!”

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